Will the money deposited in EPF be able to meet your needs after retirement?
Many people rely on their EPF deposits to cover their post-retirement expenses. For private employees, 12% of their basic salary is deposited into their EPF account every month. The employer also contributes an equal amount to the employee’s EPF account every month. The longer you work, the larger your EPF fund is likely to grow. But what if you withdraw EPF funds mid-career or take a break?
Experts say you should have a large fund for post-retirement expenses. Your monthly expenses increase every year due to inflation. Medical expenses increase as you age. Retail inflation can range between 3-4%. However, hospital bills and medication costs rise more rapidly. A surgery that costs ₹3 lakh today could rise to ₹7-8 lakh by the time you turn 70. A fund that seemed sufficient at 60 may seem insufficient at 70.
EPF also has its limitations. Contributions depend on the employee’s basic salary and formal employment. Frequent job changes, career breaks, or the start of consulting services can halt your EPF contribution. Many people withdraw funds from their EPF account in case of emergencies. According to the new rules, an employee can withdraw up to 75% of their contribution before retirement. Withdrawals reduce the balance in your EPF account.
Financial advisors advise employees to invest in other retirement products besides EPF. The first and second options are PPF and NPS. Investing in PPF for 15 years can create a substantial corpus. Importantly, the money you receive upon maturity is completely tax-free. PPF is backed by the government, making it a safe investment.
Experts say that funds deposited in EPF are very useful after retirement. However, they are not sufficient. In addition to EPF, you should also invest in PPF and NPS. If you wish, you can also start investing in equity schemes of mutual funds through SIP. This will help you build a substantial corpus by the time you retire.
